Guest sullinss Posted October 22, 2009 Report Share Posted October 22, 2009 Proceedings of the Audit Committee School District No. 2, Yellowstone County High School District No. 2, Yellowstone County Billings, Montana October 15, 2009 Call to Order Chair Marcy Mutch called the Audit Committee to order at 11:35 a.m. on Thursday, October 15, 2009 in Room 213 of the Lincoln Center. Committee members in attendance were Marcy Mutch, Jack Eagle, Laura Bailey, and Joyce Weber by telephone. Members Malcolm Goodrich and Peter Gesuale were absent. Also attending were Chief Financial Officer Thomas Harper, Auditor Edie Hanson of EideBailly LLP, and District Clerk/Internal Auditor Leo Hudetz. Communication From the Public There was no public comment. Approval of Minutes of September 23, 2009 Jack Eagle moved to recommend the Board approve the Audit Committee minutes of September 23, 2009. Marcy Mutch seconded the motion. The motion carried unanimously. Independence Standards Chair Mutch included some independence standards in the agenda for consideration and called for discussion. Members reviewed the standards. Chair Mutch moved to amend the Charter to include the Independence Standards and present the amended Charter to the Board for approval. Joyce Weber seconded the motion. The motion carried unanimously. Members Affirm Standards of Independence At the September 23, 2009 Audit Committee meeting the members voted to add to their Charter the requirement that they will “Affirm annually that all members of the Audit Committee meet the standards for independence as set forth by the District and have the appropriate background in finances and accounting procedures.” Chair Mutch asked for verbal affirmation from Committee members. Laura Bailey and Marcy Mutch verbally affirmed in accordance with the above statement. Jack Eagle affirmed with the above statement acknowledging to the Committee that his wife is employed by the District. The Trustees on the Committee have already met requirements of independence under Board Policy 1512 that pertains to Trustees. Internal Complaint Policy and Procedure Leo Hudetz reported that a couple years ago the Audit Committee suggested the District have some sort of “whistle-blower” policy. That suggestion was incorporated into the existing policy after it was reviewed by EideBailly LLC and approved by the Board. A couple years ago this Committee reviewed Policy 4310 and endorsed it. The Charter charges the Audit Committee to “Review procedures for the confidential, anonymous submission by District employees of concerns regarding questionable accounting or auditing matters.” This Committee reviewed Policy 4310 and Procedure 4310-P1 and find them appropriate and comprehensive. They recommend the District Clerk consider a minor modification in procedures to clarify to the end user that the policy and procedures match. GASB 27 – Actuary Report Robert Schmidt, of Milliman, was present by conference call to explain the results of the GASB 27 Actuarial Valuation report FY2009 of the Service Credit and Termination Pay benefit plans for the District. Actuarial valuations are required every two years. The report focuses on an analysis of the actuarial present value of all future benefits (PVFB) for active employees and an analysis of the accrued liability. Changes between the FY2007 Valuation and the FY2009 Valuation show an increase in the number of total employees by 5.5%; total annual salaries increased by 6.2%; the present value of future benefits increased 17.8%; accrued liability increased 7.4%; net pension obligation increased 73.3% (due to fewer retirements in FY08 and FY09 and higher salaries resulting in increased accrued but not paid out benefits). The Actuarial Accrued Liability of $33,870,596 is the portion of the Present Value of Future Benefits of $54,530,891 that is allocated to past service, and is a measure of the commitment that’s been made that would have to be accrued if wasn’t for the ability to amortize past accrual obligations. Because we’re able to amortize past obligations we only need to show $7,190,259 of the $33,870,596 on the books this year. This is called the Net Pension Obligation, and it is the portion that has to be accrued according to GASB 27 rules. That amount gets accrued in part through the mechanism called the Annual Required Contribution (ARC) (30-Year). Its called an Annual Required Contribution even though this an unfunded benefit so the amounts that the District contributes are actually based on a pay-as-you-go method which means we pay the benefits as people terminate and we don’t pre-fund them. If we were pre-funding them the minimum Annual Required Contribution for accounting purposes is $3,209,209; but, there is no requirement to pre-fund. If you don’t contribute at least the ARC then you build up a Net Pension Obligation. The ARC is about 4.14% of payroll. The Net Pension Obligation is the consequence of not pre-funding that benefit. The Annual Pension Cost of $3,265,011 (what we would have had to pay out if we didn’t want to build up a Net Pension Obligation) less the amount the District actually paid out on 06/30/09 of $857,753 equals this years change in the Net Pension Obligation of $2,407,258, which added to last years’ NPO equals the $7,190,259 NPO aggregate. Robert reviewed several of the tables and actuarial procedures and key assumptions used in the calculations. He reviewed the changes from the 2007 report to the 2009 report. The accrual table was hypothetically developed for historical values showing what would have been accrued if we had the opportunity to do it. The reported payroll for prior years was based on data provided by the District. A lot of the data was provided by Teachers Retirement based on State salary patterns. Robert said the majority of businesses pre-fund this cost. Thomas said he typically budgets $1.5M for termination pay. We are disclosing what is required under GASB 27 reporting requirements; however, this is real money we owe people at termination and it may become an unsustainable model. Adjournment There being no further business, the meeting was adjourned at 1:09 p.m. Marcy Mutch, Chair Sherrill Sullins, Recorder Link to comment Share on other sites More sharing options...
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